Given the globalization of the modern business environment, leaders within organizations need to be adept at managing employees of varying cultural backgrounds and at communicating with clients all across the globe. Cultural competency is a key factor in successful leadership and relationships with subordinates, business colleagues and customers.

Employee Motivation

Productive employees are one of the key components that predict the financial success of a business and being a good leader means keeping employee motivation high. Cultural competence ensures that leaders will treat all employees in the same manner and will utilize all to the fullest regardless of their diverse backgrounds, leading to increased morale across the board, according to "BusinessWeek."

Conflict Resolution

People from diverse backgrounds tend to become involved in some degree of conflict from time to time simply because they may have different ideas of how business-related topics should be addressed. The leader of a diverse employee base that is culturally competent can handle conflicts without bias and can even determine how to use conflicts as a method of fostering improved workplace communication and as a way to seek innovative approaches to business.

Client Relationships

Running an organization that does business with international clients requires a deep understanding of diverse business practices, from how emails need to be worded to what type of marketing strategy might appeal to a certain country. Leaders who spend the time researching other cultures will have more success reaching out to international leaders and will help build a good reputation for their own organization.

Office Expansion

Growing a business often leads to the creation of satellite offices around the globe. While managing employees in remote locations can present some challenges, effective leaders that are well-versed in the popular methods of communication in various geographic regions can maintain a unified feeling among the workforce. For example, "Inc." suggests using online collaboration tools in some markets to keep employees connected and using blogs for others.